A single airline services the market for a given destination in a linear city (i.e. uniform distribution in [0,1) through an airport that is located at the center of the city. Costumers have valuation v and unit demand so that net surplus u for a costumer located at z is where p is price. a. Assuming v-t-1 and the marginal cost is 0.1 find the optimal monopoly price. b. A new airline offers service from a new (less congested) airport located at one extreme. Assuming this airline has lower marginal cost (i.e. 0.05), find equilibrium prices. Com- pare with (a). A single airline services the market for a given destination in a linear city (i.e. uniform distribution in [0,1) through an airport that is located at the center of the city. Costumers have valuation v and unit demand so that net surplus u for a costumer located at z is where p is price. a. Assuming v-t-1 and the marginal cost is 0.1 find the optimal monopoly price. b. A new airline offers service from a new (less congested) airport located at one extreme. Assuming this airline has lower marginal cost (i.e. 0.05), find equilibrium prices. Com- pare with (a)